American Airlines CEO fired top exec after controversial 'modern retailing' strategy infuriated corporate clients
American Airlines CEO fired top exec after controversial 'modern retailing' strategy infuriated corporate clients
American Airlines CEO Dismisses Top Executive
Dismissal of Commercial Chief
American Airlines CEO, Robert Isom, fired the commercial chief, Vasu Raja, following a critical Bain & Co. report on a new marketing strategy that alienated corporate clients.
Controversial Marketing Strategy
The strategy, termed "modern retailing," aimed to shift bookings from agencies to direct sales, reducing the sales department and leading to significant client dissatisfaction.
Impact on Company Performance
The strategy contributed to lagging revenue and a drop in managed corporate travel volumes compared to competitors, ultimately leading to a 14% fall in American's shares, the largest in nearly four years.
How did the new marketing system, dubbed "modern retailing," alter the booking process for American Airlines' customers?
The new marketing system introduced by American Airlines, referred to as "modern retailing," significantly altered the booking process by encouraging customers to book flights directly through American Airlines instead of using external booking agencies56. This shift aimed to centralize sales and presumably offer more controlled and potentially personalized service directly from the airline. As part of this strategic change, the airline also reduced its sales department, indicating a move away from traditional agency-based booking methods towards a direct sales model4. This approach was intended to streamline operations and enhance direct customer interactions but led to dissatisfaction among some corporate clients and travel management firms.
What specific changes in American Airlines' sales strategy were highlighted as concerns by corporate travel advisers in the Bain & Co. report?
The Bain & Co. report highlighted significant concerns regarding American Airlines' recent shift in its sales strategy, which involved a new marketing system called "modern retailing3." This strategy was designed to encourage customers to book directly through American Airlines rather than using traditional booking agencies5. This shift led to a reduction in the airline’s sales department and was intended to streamline operations and increase direct sales. However, the report revealed that this change alienated corporate clients and travel management firms, contributing to lagging revenue as American Airlines’ growth in managed corporate travel volumes fell behind its competitors, United Airlines and Delta Air Lines35.